What are FHA loans? If you’re considering buying a home, you’ll want to know the answer to this question. An FHA loan is a mortgage that the Federal Housing Administration insures, so your lender can offer you a lower interest rate. This blog post will cover everything you need to know about FHA loans: what they are, how they work, and who is eligible for them. Keep reading to learn more!
What are FHA loans?
FHA loans are mortgage loans insured by the Federal Housing Administration (FHA). The FHA is a Department of Housing and Urban Development (HUD) division, so you may have heard of them before. HUD’s mission is to provide affordable, safe housing for all Americans, and the FHA’s role is to help make that happen. Additionally, they are government backed loans, so they have a few benefits that other loans don’t. FHA loans are the most common type of government-backed home loan.
How do FHA loans work?
FHA loans are available to eligible home buyers, making it easier for buyers to qualify for a mortgage. With an FHA loan, you can put as little as 3.5% down on a home and use gift funds from family members to help with your down payment. Additionally, your credit score doesn’t need to be as high as it would with a conventional mortgage. So if you’re not quite at that 720 mark yet, an FHA loan could still be an option for you.
Who is eligible for an FHA loan?
To get an FHA loan, you must be a U.S. citizen or legal permanent resident and have a valid social security number. You’ll also need to show that you have a steady income and employment, and you’ll need to have a good credit history. If you’re buying a home, you’ll need to prove that you have enough cash saved up for a down payment (usually 3.5% of the purchase price). If you’re looking for mortgage refinancing, there are some additional requirements, but the process is generally simpler.
FHA loans are a great option for eligible home buyers, thanks to their lower down payment requirements and more lenient credit standards. If you think a home loan might be right for you, talk to your lender about getting pre-approved. And if you’re still not sure, remember that other government-backed loans are available, like VA loans for veterans or USDA loans for rural homeowners.
